This is the 2nd part of a series of articles by Christopher Chan on ‘Land Law’.
The extension of leasehold land is provided for under sections 76(a), 204B & 197 of the National Land Code (NLC) 1965. Section 76 (a) deals with alienation; section 197 details the procedures for a proprietor to surrender his/ her title to the State Authority and section 204B provides for certain powers to the State Authority to approve surrender and realienation.
Under the latest amendments to the NLC, which is yet to be enforced, there is a new provision under section 90A which specifically provides for the extension of leasehold land.
It is advisable for the owner to apply for the extension of lease before the expiry of the same. If the owner does not renew the lease and the lease expires, the land shall revert to the state government. The land is then available to any other persons who wishes to apply for ownership.
For Selangor, the formula for calculating the premium for the extension of leasehold land can be found in the Selangor Land Rules 2003 & Selangor Quarry Rules 2003.
The two options given by the Selangor government in their Guideline issued by the Selangor Department of Land and Mines (PTG Selangor), dated June 2011, for private residential ownership scheme are as follows:
- Option 1: To pay for the full rate of premium with a 30% rebate
- Option 2: To pay a premium of RM 1,000. If the owner decides to sell the property at a later date in the future, the owner then has to pay the balance of the premium at that point in time. A Registrar Caveat will be lodged on the land to prevent the owner from disposing the property to a third party. This scheme is subject to the condition that the owner continues to use the premises as his / her main area of residence.
In Selangor, the premium for lease extension for residential property is:
F: (1/4) x (1/100) x (Market Value of land) x (lease period – years remaining on the lease) x (land area). *Leases are usually renewed for a 99-year period.
As an example, let’s say you have a bungalow land with a land size of 7,000 sq ft in Petaling Jaya with about 45 years remaining on the lease. The premium that you would have to pay shall be as follows:
(1/4) x (1/100) x (220) x (99 – 45) x (7,000) = RM 207,900. After deducting the 30% rebate, it comes to RM 145,530 and this is what you would have to pay.
The above example is based on the assumption that the government has valued the land at RM 220 per sq ft.
The formula for the extension of lease for commercial and industrial land in Selangor is as follows:
F: (3/4) x (1/100) x (value of the land) x (term of new lease minus the balance of the existing lease)
For Kuala Lumpur
For Kuala Lumpur, the formula for calculating the premium for the extension of leasehold land can be found in the Federal Territory of Kuala Lumpur Land Rules 1995.
The formula for calculating the premium for the extension of lease for all categories of land use in Kuala Lumpur is as follows:
F: (1/4) x (category of land use) x (value of the land) x (1/99) x (term of new lease minus balance of the existing lease).
Renewal of lease for properties with strata titles (non-landed properties)
For the renewal of properties with strata titles such as condominiums and apartments, there is a new provision for this under the newly created section 90A(8) of the NLC, whereby the application may be made by the management corporation on the authority of an unanimous resolution, and such application shall be regarded as an application in respect of the alienated land and provisional block.
This basically means that the master title (that the condominium sits on) as well as all the strata titles of the individual units in that particular condominium must be renewed at the same time and the application shall be done by the management corporation concerned.
Christopher Chan is an Associate Director and Registered Estate Agent with Hartamas Real Estate Group. He holds a Bachelor of Arts (Victoria University of Wellington, New Zealand), Post Graduate Certified Diploma in Accounting & Finance (CDipAF) (The Association of Chartered Certified Accountants (ACCA), UK), Master of Business Administration (MBA) (Edinburgh Business School, Heriot Watt University, Scotland) and is a Certified Residential Specialist (The National Association of Realtors, USA) and is a member of the Malaysian Institute of Estate Agents (MMIEA). He was an adjunct lecturer at UCSI University.
He can be reached at firstname.lastname@example.org.
Stay tuned for the continuation of this informative series over the coming weeks!
Click here to read Part 1